Libya: Can It Become an Oil Superpower?

Benghazi rejoices at news that rebels have seized Qaddafi’s compound Gianluigi Guercia/AFP/Getty Images

By Stanley Reed and Chris Stephen

The messiest part of war is how it ends. Even as Libyan rebels and their supporters fired rifles in the air and poured into Green Square to celebrate the downfall of Muammar Qaddafi, the scenes at the Mujama Aleiadat hospital in Misrata, 130 miles from Tripoli, told a grimmer story. The hospital’s corridors were jammed with the wounded, including a 3-year-old boy hit in the arms and abdomen by shrapnel from a shell that also killed his 6-year-old brother in neighboring Zlitan. One of the hospital’s own, a 20-year-old medic who crewed ambulances into the front lines since the start of the war, had been killed by a sniper bullet. “Qaddafi has lost, but people are still fighting,” says Dr. Mohammed Ahmed, who was caring for the wounded boy. “I don’t know why.”

The apparent end of the dictator’s brutal, often bizarre, 42-year rule was greeted with relief not just among ordinary Libyans, but also by leaders of the NATO countries who had launched a hastily arranged anti-Qaddafi military campaign that’s now lasted more than six months. The work of stabilizing post-Qaddafi Libya will take a lot longer than that. Basic services like water and electricity are barely functioning, and the country’s physical infrastructure is in ruins. The rebels, a coalition including longtime Qaddafi opponents and former regime figures, say they intend to establish a democracy, though Libya has neither a political party nor a constitution. Even Mustafa Abdel Jalil, head of the rebels’ National Transitional Council (NTC), warned on Aug. 22 that governing in the post-Qaddafi era will “not be a bed of roses.”

What Libya does have going for it, of course, is oil. With 47 billion barrels of reserves, the 74th-largest economy by gross domestic product possesses 3.4 percent of the world’s known supply. In normal times, oil and gas account for 95 percent of exports and 80 percent of government revenues. The civil war has sent production plummeting, from 1.6 million barrels a day in 2010 to 60,000 recently.

The emergence of a new set of leaders has already set oil companies hustling to grab a stake of a hugely lucrative market. Their prospects, as much as those of the Libyan people, depend on how quickly a group of disputatious opposition figures with no experience governing together can bring order to a devastated nation. “You can’t divorce the political transition from how fast oil is going to come online,” says Edward P. Djerejian, director of the James A. Baker III Institute for Public Policy at Rice University in Houston and a former U.S. ambassador to Israel and Syria. “They have to move together; there has to be a strong sense of political stability.”

History says Libya is not a good bet to become an oil superpower anytime soon. Three decades after the Iranian revolution in 1979, production there has yet to be completely restored. Iraq needed four years to equal its output before the 2003 U.S. invasion, and the ex-Soviet Union countries required as much as a decade. “Libya is not as extreme a case as Iran, but it is not going to be easy,” says Peter Hutton, an analyst at RBC Capital Markets in London.

For centuries Libya has been divided along geographic and tribal lines with a weak central government in the middle. Over the last four decades, Qaddafi was the government, reserving all important decisions, including on key oil concessions, for himself. His talent as a global attention-hog may have been unique, but as a ruler he hewed to the dictator’s playbook: dispensing patronage to his loyalists, creating a cult of personality, and brutally persecuting his enemies. His sins against his citizens may dwarf his sins against the state, but he undermined the machinery of government and commerce at every chance. “Here is a country where the grand leader by design gutted all institutions of governance,” says Robert Danin, a senior fellow for the Middle East and Africa at the Council on Foreign Relations in Washington. “When he leaves, there goes the state.”

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